RERA: Brokers may face penalty for mis-selling to consumers

As per clauses in the RERA, not only will developers have to play fair but brokers also need to be aware of what they are selling and may face penalty for mis-selling to consumers.

Updated: May 3, 2017 12:46 PM

Brokers play an important role in real estate transactions but they have never been under the ambit of any regulatory authority.

Chetan Kapur

While RERA improves transaction, transparency and builds customer confidence, there is also some negative impact, which the developers have to face. The developers have now to maintain and work through an escrow account. RERA mandates that 70 per cent of cash inflows goes exclusively into this escrow account and interest on land and other costs incurred by the developer. Developers need to incur the cost as the pre-launch are now history, there will be new launches only with clear title proper legal approvals. The developers and builders need to pre-estimate and calculate the cost of construction before the project is even launched and share with RERA.

Apart from real estate brokers, the council will have representatives from other sector stakeholders, i.e. home buyers, developers, architects and legal experts, etc.Brokers play an important role in real estate transactions but they have never been under the ambit of any regulatory authority. According to analysts, the Act will certainly bring professionalism within real estate brokers.

There are some positive to RERA-

1. More revenue: If the RERA is genuinely followed by developers and the transparency is shared religiously about the documents, area efficiency, timely and quality delivery, the lost trust will be reinstated and more and more people will start investing in the real estate regular as a preferred asset class to invest, similar with home buyers.

2. Timely payment- When the investors/home Buyers buy the property with complete transparency and correct advise, he will always make an informed decision he will always ensure that the property is to keep and will make sure the payments of the property always paid on time which make sure developers cash flow are not in pain.

3. Delayed penalty interest- If the promoter fails to complete or is unable to give possession of the property within the agreed period, he has to return the total paid amount with interest rate as mentioned in the agreement to sale.

If owner does not intend to withdraw from the project, he will be paid, by the builder, interest for every month of delay, till possession.

4 . Impact on brokerages: As per clauses in the Act, not only will developers have to play fair but brokers also need to be aware of what they are selling and may face penalty for mis-selling to consumers. Fair deals will lead to clean commissions with transparency from each party in secondary sales and fair and clean commissions structure in primary brokerage structure. A client will have the access to all information, in terms of actual money spent on construction by the developer, the basic sale price, preferred location charged attributes etc as well as commissions paid to the brokers.

The author is Director, Golden Bricks – a Gurgaon based real estate consultancy & research firm.